Clearwater Paper Corporation Q1 FY2026 earnings call

• Highlights from first quarter: shipment volumes up 5%, net sales down 5%, adjusted EBITDA slightly above guidance with weather related impacts, launched Velora brand, restructured Cypress Bend facility, union ratified labor agreement, received insurance proceeds.
• Industry conditions: SBS shipments nearly flat, forecasted to grow 4% in 2026, industry capacity excess reduced by 50%, bleached imports down, European producers facing cost pressures.
• Actions taken: Cypress Bend mill restructured for cost reduction, price increase on cup and other extruded products to $60 per ton effective in May, $50 per ton increase on non-extruded grades challenging due to oversupply, launched Velora product line, evaluating CUK investment and CRV opportunities.
• Strategic initiatives: Launch of Velora, evaluating CUK and CRV, focus on operating efficiently, protecting share with strategic customers, aiming for cash flow neutrality this year, refinancing or extending debt maturities.

Shipment volumes were up 5%, but net sales were down 5% compared to prior year. Adjusted EBITDA for the quarter was 2 million, slightly above guidance. SBS shipments were nearly flat in first quarter of 2026 vs 2025, forecasted to grow 4% in 2026. Cypress Bend facility restructured with 20% reduction in rolls, expected annual cost reduction of 8-12 million. Lewiston, Idaho union ratified new four-year labor agreement. Insurance proceeds of 17.5 million received in first quarter with total over 40 million, still pursuing 50 million remaining policy limit. Net sales were $360 million, net loss from continuing operations of $13 million or $1.29 per diluted share. SG&A as percentage of sales below target range of 6%-7%.

• Second quarter adjusted EBITDA expected in range of break even to negative 10 million due to major maintenance outage at Lewiston facility and higher input costs.
• Full-year assumptions: Revenue $1.4 to $1.5 billion, flat to modest shipment growth, 70 million carryover impact from 2025 market-driven price decreases, productivity gains offsetting 2%-3% of input cost inflation, major maintenance outage costs 45-50 million, 6 million benefit from Cypress Bend restructuring, capital expenditures 65-75 million, targeted working capital improvement 20-30 million, SG&A maintained toward lower end of 6%-7% target. Believes path to break even or better free cash flow for the year.

• Industry oversupply leading to margin issues and negative operating cash flow after capex.
• Cost pressures from Middle East conflict on chemicals, wood, and diesel costs, projecting 3-5 million quarterly headwinds until conflict resolved and supply chains normalize.
• Challenges in implementing price increases on non-extruded grades due to industry oversupply affecting margin sustainability.

Q: Regarding Cypress Bend restructuring, should we consider this the extent of Clearwater's supply response to difficult market environment and assessment of industry cost curve and supply response speed.

A: At Cypress Bend, reduced rolls by 20% for $8-12M annual savings, intend to run at reduced rates until industry improves. Industry actions reduced 50% of oversupply, Reese's forecasting 90+% utilization by year end.

Q: For Sherry on free cash flow bridge commentary, perspective on tax refund amount and quarterly timing.

A: Full year tax refund estimated 27-28 million, received 4 million in first quarter, ~23 million remaining for balance of year.

Q: Debt rating downgrade from Moody's, bearing on borrowing costs.

A: More applicable to future refinancings.

Q: 3-5 million per quarter input cost pressure until conflict resolved, comparison of costs today vs February and recovery mechanisms.

A: Sequential comparison vs prior, costs in chemicals, transportation, wood, Cypress Bend restructure to deliver ~2 million per quarter cost reduction, $60 price increase on extruded products.

Q: Valora product fit into portfolio, uptake from customers on FBB and share of volumes.

A: Valora is another tool in toolkit for folding carton customers, lightweight grade competing with FBB, not incremental growth, monitor uptake.

Q: Customer response to $60 per ton price increase on extruder products, backlogs strength.

A: Still working through with customers, backlogs strong on those products due to being polycoated and sold out.

Q: CUK investment, what would get over hump and CRB optionality.

A: CUK investment depends on balance sheet and cash flows, 60 million investment, evaluating paths to create CUK, CRB via M&A or partnerships.

Q: Further actions if marketing conditions remain challenging and industry excess capacity not absorbed.

A: Focus on price, demand, cost reductions, assess cost structure and assets in long run.